Australasian Scale Co Ltd v Commissioner of taxes (Queensland)

53 CLR 534
(1935) 41 ALR 353
(1935) 3 ATD 171

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(Judgment by: STARKE J)

AUSTRALASIAN SCALE v COMMISSIONER

Court:

Judges: Rich J
Starke J
Dixon J
Evatt J
McTiernan J

Subject References:
Constitutional law
Inter-State trade and commerce
Constitution (Cth), s 92
Taxation and revenue
Income tax
Foreign company
Profits made within State
Statutory provisions
Proportion of total profits
Profits unable to be satisfactorily determined
Opinion of Commissioner

Legislative References:
Income Tax Act 1924 (Qld) (15 Geo V No 34) - s 14(4)(iv)

Hearing date: 10 April 1935; 11 April 1935;
Judgment date: 30 April 1935

MELBOURNE

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Judgment by:
STARKE J

The appellant company is registered in New South Wales, and has its head or principal office there. Its business is manufacturing, importing, and selling scales. It has a branch office in Queensland, and there carries on business as a seller of scales. The Income Tax Act 1924 of Queensland provides, by s. 14 (4) (iv.), as follows:"The taxable income of any other foreign company liable to assessment shall be the amount of the profits made by the company in Queensland, plus any expenses and charges which are not allowable deductions under this Act. If such profits cannot, in the opinion of the Commissioner, be otherwise satisfactorily determined, the taxable income of the company may be assessed by the Commissioner at a sum which bears the same proportion to the total profit made by the company as the sales made in Queensland bear to the total sales made by the company." The appellant company is a foreign company liable to assessment under these provisions.

The territorial competence of the legislation cannot be doubted; Queensland has competence to impose taxes upon persons, natural or artificial, resident or carrying on business within its territory (Commissioners of Stamps (Q.) v Wienholt ^[F4] ; at pp. 540, 541; Barcelo v Electrolytic Zinc Co of Australasia ^[F5] , at p. 409; Colonial Gas Association Ltd v Federal Commissioner of Taxation ^[F6] ). But the provision under which the appellant was assessed, namely, that which provides for the case in which profits cannot in the opinion of the Commissioner be otherwise satisfactorily determined, was attacked on the ground that it infringes s. 92 of the Constitution: "Trade commerce and intercourse among the States ... shall be absolutely free." A State must not, therefore, burden inter-State trade, by taxation or otherwise; it is burdened if a tax be laid upon an operation or act of inter-State commerce. But it has long been recognized, if not actually decided by this Court, that a general income tax imposed by the States is not obnoxious to the provisions of s. 92, even in cases-which are many-where the income includes receipts from inter-State trade. The reason is that a general income tax is not imposed upon any operation or act of inter-State commerce; it is laid after inter-State trade is completed, "after all expenses are paid and losses adjusted, and after the recipient of the income is free to use it as he chooses." (Cf. Peck & Co v Lowe ^[F7] , at p. 1052; United States Glue Co v Town of Oak Creek ^[F8] .) The Queensland Act (s. 14 (4) (iv.)), it should be observed, taxes profits made by the company in Queensland, not sales or the gross proceeds of sales. In the case in which those profits cannot, in the opinion of the Commissioner, be otherwise satisfactorily determined, the tax is nevertheless laid upon profits-the total profits made by the company-but they are measured by the proportion that the sales made in Queensland bear to the total sales made by the company. It is simply a means-artificial it may be-of estimating the profits made in Queensland, but no tax is imposed upon the sales or the proceeds of the sales, "either in form or in fact." (Cf. Maine v Grand Trunk Railways Co ^[F9] .) In my opinion, a tax so levied in no wise contravenes the provisions of s. 92 of the Constitution. But I express no opinion upon the validity of the third clause of s. 14 (4) (iv.) providing for the assessment of taxable income upon total sales made in Queensland; it raises other considerations, as may be gathered from the reasons already given.

Another question raised upon this appeal is whether the Commissioner's opinion that the profits could not otherwise be satisfactorily determined was subject to appeal by virtue of the provisions of ss. 45-48 of the Queensland Act. The Court of Review under the Act has very wide powers, but the condition of the authority conferred by the sections is the opinion of the Commissioner. It is his opinion that is required and is to govern. So long as it is honest and not arbitrary or capricious, that opinion is final and not open to appeal.

The result is that the appeal of the Australasian Scale Co should be dismissed, but the judgment of the Supreme Court should be set aside in so far as it declares that the opinion of the Commissioner was open to review and a judgment should be given in a contrary sense.